From Rebound to Retrenchment: Canada’s Housing Market Braces for a Prolonged Slowdown
May 23, 2025
By Allwyn Dsouza, Senior Analyst, Research and Insights, REIC/ICI
By Allwyn Dsouza, Senior Analyst, Research and Insights, REIC/ICI
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Entering 2025, analysts anticipated a housing market recovery on the back of easing mortgage rates. However, unforeseen headwinds – notably a U.S./Canada trade conflict and domestic policy shifts – upended this trajectory by spring. By April, every major publication has revised their outlook.
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Table 01: 2025 Housing Market Forecasts (Jan 2025 vs. May 2025)
Source: Truenorthmortgage
The Canadian Real Estate Association (CREA) initially forecast an 8.6% jump in 2025 home sales and modest price gains. By April, CREA slashed its sales forecast by ~50,000 units (down to ~482,700 sales, essentially flat vs. 2024) and revised the national average price outlook to a slight 0.3% decline (about $687,900, ~$30k lower than the January call)[1]. In short, what was expected to be a “slam dunk rebound year” quickly shifted to a “treading water” scenario.
Sales and price Trends
Figure 1.0
Figure 1.0
Source: CMHC Rental Market Report
Demand fell sharply in Q1 2025 as buyers moved to the sidelines. Monthly sales volumes dropped for four consecutive months from December through March. National home sales in March were down 9.3% year-over-year, the weakest March since 2009[2]. April appears to have seen further annual declines in most large markets, although Montreal was a notable exception.
Figure 2.0
Prices, which had stabilized late in 2024, began edging down again in early 2025. The MLS® Home Price Index (HPI) fell for three straight months through March and was 2.1% lower year-over-year[3].
Supply, Inventory and Balance
Figure 3.0
Figure 3.0
Source: CREA
Figure 4.0
Source: CREA
Housing supply has rebounded from record lows. In March, there were 165,800 listings nationally (+18.3% y-o-y)[4]. April’s figures show and even higher jump, especially in key CMAs– e.g. active listings were up +54% y-o-y in the GTA (27,386 units)[5] and +30% in Metro Vancouver (16,207 units, the highest since 2014)[6].
This influx of supply, coupled with weaker sales, shifted many markets toward balance or even buyer-favorable conditions. The sales-to-new-listings ratio (SNLR) for Canada fell to 45.9% in March, the lowest since 2009 (a ratio below ~50% generally indicates ample supply relative to demand). Major cities tell an even dire tale. In April, the SNLR hovered around 30% in both GTA and Vancouver (clear buyers’ market territory), compared to ~60–70% a year ago[7]. Even previously red-hot Calgary saw its SNLR drop to ~58% (down from ~80%+ last spring) – now in balanced range[8]. Canadian home sales have plunged well below their 10-year average, swelling inventory and tilting negotiating power toward buyers.
Key factors leading to the slowdown in residential real estate
Economic Backdrop: Several economic factors contributed to cooling demand. The Bank of Canada’s interest rate, which peaked at 5.0% in 2023, was cut aggressively in late 2024 as inflation eased. By April 2025 the overnight rate sat at 2.75%, representing much cheaper borrowing costs than a year ago[9]. This monetary easing improved affordability metrics on paper, and indeed boards did report some qualified buyers re-entering the market. as monthly mortgage payments have become more attainable for many households with the recent rate drop. However, softer labor market conditions and low confidence tempered this benefit. After a strong run in 2024, employment growth stalled in Q1 2025 and unemployment ticked up (a trend that prompted speculation of another BoC rate cut by June)[10]. Inflation, while much lower than 2022 levels, remained around ~2–3% in early 2025 (March CPI +2.3% y-o-y)[11]. Real income thus grew only modestly.
Geopolitical Shocks: The dominant story of early 2025 was a rapidly escalating trade dispute with the U.S., which hit consumer and business confidence hard. In January, the U.S. administration abruptly threatened sweeping tariffs on Canadian imports, raising the specter of a trade war. The mere “threat of a trade war with our largest trading partner” had an immediate chilling effect on housing: realtors observed a notable drop-off in homebuying in the final week of January when tariff news broke[12]. By February, some U.S. tariffs had actually been imposed – including duties on Canadian steel and aluminum – and negotiations were fraught. This tariff turmoil is being cited as the key reason for the housing slowdown[13]. The data backs this up: sales fell nearly 10% m-o-m in February (the largest one-month drop since 2022)[14], and by March the decline had widened to virtually every region of the country[15]. Figure 01 shows how home prices, which started to recover in late 2024, turned downward once the trade conflict emerged.
Compounding the trade issues, Canada held a federal election in April 2025 which added policy uncertainty in Q1. Overall, the first four months of 2025 saw a confluence of negative shocks that derailed the optimistic forecasts: a tariff-driven confidence shock, an election policy transition, and a moderating economy all hitting at once.
This influx of supply, coupled with weaker sales, shifted many markets toward balance or even buyer-favorable conditions. The sales-to-new-listings ratio (SNLR) for Canada fell to 45.9% in March, the lowest since 2009 (a ratio below ~50% generally indicates ample supply relative to demand). Major cities tell an even dire tale. In April, the SNLR hovered around 30% in both GTA and Vancouver (clear buyers’ market territory), compared to ~60–70% a year ago[7]. Even previously red-hot Calgary saw its SNLR drop to ~58% (down from ~80%+ last spring) – now in balanced range[8]. Canadian home sales have plunged well below their 10-year average, swelling inventory and tilting negotiating power toward buyers.
Key factors leading to the slowdown in residential real estate
Economic Backdrop: Several economic factors contributed to cooling demand. The Bank of Canada’s interest rate, which peaked at 5.0% in 2023, was cut aggressively in late 2024 as inflation eased. By April 2025 the overnight rate sat at 2.75%, representing much cheaper borrowing costs than a year ago[9]. This monetary easing improved affordability metrics on paper, and indeed boards did report some qualified buyers re-entering the market. as monthly mortgage payments have become more attainable for many households with the recent rate drop. However, softer labor market conditions and low confidence tempered this benefit. After a strong run in 2024, employment growth stalled in Q1 2025 and unemployment ticked up (a trend that prompted speculation of another BoC rate cut by June)[10]. Inflation, while much lower than 2022 levels, remained around ~2–3% in early 2025 (March CPI +2.3% y-o-y)[11]. Real income thus grew only modestly.
Geopolitical Shocks: The dominant story of early 2025 was a rapidly escalating trade dispute with the U.S., which hit consumer and business confidence hard. In January, the U.S. administration abruptly threatened sweeping tariffs on Canadian imports, raising the specter of a trade war. The mere “threat of a trade war with our largest trading partner” had an immediate chilling effect on housing: realtors observed a notable drop-off in homebuying in the final week of January when tariff news broke[12]. By February, some U.S. tariffs had actually been imposed – including duties on Canadian steel and aluminum – and negotiations were fraught. This tariff turmoil is being cited as the key reason for the housing slowdown[13]. The data backs this up: sales fell nearly 10% m-o-m in February (the largest one-month drop since 2022)[14], and by March the decline had widened to virtually every region of the country[15]. Figure 01 shows how home prices, which started to recover in late 2024, turned downward once the trade conflict emerged.
Compounding the trade issues, Canada held a federal election in April 2025 which added policy uncertainty in Q1. Overall, the first four months of 2025 saw a confluence of negative shocks that derailed the optimistic forecasts: a tariff-driven confidence shock, an election policy transition, and a moderating economy all hitting at once.
Figure 5.0
Source: CMHC
Despite a cooling resale market, homebuilding remained resilient through early 2025. Housing starts averaged 225,000 annualized units in Q1—just below 2024’s ~240,000 pace and still above the 10-year average (CMHC)[16]. Developers have shifted focus toward multi-unit construction, with roughly 70% of Q1 starts being apartments and condos, reflecting both market demand and policy support for higher-density housing.
A significant wave of completions is now hitting the market. Projects launched during the 2021–22 boom are delivering at record pace, especially in Toronto (~32,000 condos) and Vancouver (~20,000 rentals)[17]. CMHC expects 2025 to set a new high for total completions, particularly in purpose-built rental. This influx is easing rental market pressure: national rent growth has slowed to ~2% year-over-year, down from double digits in 2023, helped by softer demand due to lower international student arrivals.
Prime Minister Mark Carney’s administration has committed to sustaining construction momentum via the Build Canada Homes initiative, pledging $25 billion in financing to scale modular, factory-built housing[18]. This strategy aims to drive affordability and maintain elevated building levels into 2026–27, even if private investment declines.
Overall, completions are helping correct Canada’s supply-demand imbalance. Rising inventory reflects not only weak sales, but a long-overdue addition of housing stock. While this suppresses prices in oversupplied areas like Toronto condos, it supports long-term affordability. Builders are expected to increasingly target mid-market and modular housing, aligning with both consumer needs and government priorities.
Market Sentiment and Stakeholder Perspectives
Given the crosscurrents affecting Canadian real estate, market sentiment in early 2025 has been cautious at best. There is no single formal “sentiment index” for housing, but various surveys and statements from industry stakeholders reveal a picture of heightened uncertainty and wary optimism:
In summary, the housing sentiment for Canada as of May 2025 would read as “cautiously pessimistic.” There is a widespread wait-and-see attitude – prospective buyers are more inclined to delay, and sellers are grudgingly adjusting expectations.
The market’s actual trajectory through May 2025 has been much weaker than the January outlook across most metrics. Sales volumes underperformed by a wide margin, and price gains that were expected in many regions have not materialized (instead, significant declines occurred). The “recovery year” turned into a stagnant/decline year. Industry analysts openly acknowledge the miss: “These outcomes are much weaker than our pre-Trump inauguration forecast made in December,” TD Economics wrote, noting they had to mark down 2025 forecasts materially after Q1 data[23]. CREA’s April announcement plainly stated that “what had been expected to be a recovery year for housing is now in jeopardy” due to the tariffs24.
Going forward, forecasters have quickly updated their models. The consensus now aligns with what we had forecast at the beginning of the year: flat sales in 2025 and essentially flat-to-slightly down prices overall. Any upside that was envisioned has largely been pushed into 2026.
Our H2 2025 Canadian Housing Market Outlook
As we enter the second half of 2025, Canada’s housing market faces mixed signals amid economic uncertainty and evolving policy shifts.
Interest Rates & Financing:
The rate environment is expected to ease further, offering relief to borrowers. With inflation hovering near 2% and economic growth slowing, the Bank of Canada is widely expected to cut rates again—potentially to 2.25% by summer (RBC Economics)[25]. A weak jobs report in April further supports this view[26]. As mortgage rates dip into the low 3% range, monthly housing costs may become the most affordable since 2020, potentially reactivating buyer interest by late 2025.
Economic & Employment Risks:
However, the broader economy remains fragile. Ongoing U.S.–Canada trade tensions pose a major risk. Negotiations between Prime Minister Carney and President Trump are underway, but prolonged tariffs could disrupt manufacturing and agriculture, trigger layoffs, and erode consumer confidence. With 38% of Canadians now concerned about job security (BMO survey)[27], a recession could significantly dampen housing demand through year-end.
Immigration & Demographics:
Recent federal policies are set to slow population growth. Permanent resident targets were reduced to 395,000 for 2025 (down from 465,000 in 2024)28, and temporary resident caps are being phased in[29]. These shifts may soften rental demand in cities like Toronto and Halifax, particularly for condos and student housing. While the full impact will unfold gradually, the near-term trajectory for housing demand is lower than earlier projections, suggesting moderate price trends and fewer bidding wars.
Policy & Affordability Initiatives:
The federal government is prioritizing supply-side solutions. Carney’s $25 billion “Build Canada Homes” initiative aims to scale modular housing and factory-built homes, with rollout expected in late 2025. Additional incentives for first-time buyers—such as tax credits or down payment support—may arrive in the fall fiscal update. Meanwhile, Ontario and B.C. are advancing provincial reforms to fast-track approvals and increase housing stock. All these efforts are geared toward improving supply and affordability, which over time will further moderate price growth. The days of 10% annual price gains likely won’t return soon, given this policy shift.
The Real Estate Institute of Canada (REIC) equips its members to navigate market complexities, ensuring they stay ahead of evolving market trends. As we look at 2025, with its mix of rate cuts, policy changes, and shifting demand dynamics, REIC fosters collaboration between stakeholders to tackle challenges like affordability, supply constraints, and immigration policy shifts. By championing ethical practices, innovative solutions, and professional education, REIC empowers members to thrive in an uncertain and transformative market landscape.
A significant wave of completions is now hitting the market. Projects launched during the 2021–22 boom are delivering at record pace, especially in Toronto (~32,000 condos) and Vancouver (~20,000 rentals)[17]. CMHC expects 2025 to set a new high for total completions, particularly in purpose-built rental. This influx is easing rental market pressure: national rent growth has slowed to ~2% year-over-year, down from double digits in 2023, helped by softer demand due to lower international student arrivals.
Prime Minister Mark Carney’s administration has committed to sustaining construction momentum via the Build Canada Homes initiative, pledging $25 billion in financing to scale modular, factory-built housing[18]. This strategy aims to drive affordability and maintain elevated building levels into 2026–27, even if private investment declines.
Overall, completions are helping correct Canada’s supply-demand imbalance. Rising inventory reflects not only weak sales, but a long-overdue addition of housing stock. While this suppresses prices in oversupplied areas like Toronto condos, it supports long-term affordability. Builders are expected to increasingly target mid-market and modular housing, aligning with both consumer needs and government priorities.
Market Sentiment and Stakeholder Perspectives
Given the crosscurrents affecting Canadian real estate, market sentiment in early 2025 has been cautious at best. There is no single formal “sentiment index” for housing, but various surveys and statements from industry stakeholders reveal a picture of heightened uncertainty and wary optimism:
- Consumer Confidence in Economy: General economic confidence has deteriorated with the trade war news. A Royal LePage poll in April found only 49% of Canadians are confident in the economy[19]. This is a weaker confidence reading than a year ago – clearly, nearly half the populace feels pessimistic. Such economic worry tends to translate into housing caution (big purchases are delayed when people are nervous about jobs or incomes).
- Recession Expectations: Relatedly, recession fears have spiked. A BMO survey in April showed 74% of Canadians were concerned a recession is looming (up from 60% just a month prior)[20].
- Mortgage Rate Sentiment: Despite rates falling, many buyers are holding out for even lower rates. BMO’s poll found 67% of prospective homebuyers plan to delay purchasing until interest rates decline further, and two in five (38%) won’t buy until rates drop to 3% or below[21]. Another 44% said they are unsure what rate they would be comfortable with – implying uncertainty is keeping them on the sidelines. This suggests that even though 5-year fixed mortgages around 4% are available (historically a decent rate), sentiment is that “rates are high, better to wait.” Clearly, memories of the ultra-low 2020–2021 rates are still anchoring expectations.
- Housing Market Optimism/Pessimism: Real estate industry leaders and economists are voicing guarded views. In Ontario and B.C., the tone is largely pessimistic in the short run. “Markets are hugely tilted in favor of buyers in B.C. and Ontario,” said TD economist Rishi Sondhi, noting even Alberta was rapidly loosening[22]. He expects average prices to fall further in Q2 after a ~5% drop in Q1. This aligns with CREA’s downgraded forecast.
In summary, the housing sentiment for Canada as of May 2025 would read as “cautiously pessimistic.” There is a widespread wait-and-see attitude – prospective buyers are more inclined to delay, and sellers are grudgingly adjusting expectations.
The market’s actual trajectory through May 2025 has been much weaker than the January outlook across most metrics. Sales volumes underperformed by a wide margin, and price gains that were expected in many regions have not materialized (instead, significant declines occurred). The “recovery year” turned into a stagnant/decline year. Industry analysts openly acknowledge the miss: “These outcomes are much weaker than our pre-Trump inauguration forecast made in December,” TD Economics wrote, noting they had to mark down 2025 forecasts materially after Q1 data[23]. CREA’s April announcement plainly stated that “what had been expected to be a recovery year for housing is now in jeopardy” due to the tariffs24.
Going forward, forecasters have quickly updated their models. The consensus now aligns with what we had forecast at the beginning of the year: flat sales in 2025 and essentially flat-to-slightly down prices overall. Any upside that was envisioned has largely been pushed into 2026.
Our H2 2025 Canadian Housing Market Outlook
As we enter the second half of 2025, Canada’s housing market faces mixed signals amid economic uncertainty and evolving policy shifts.
Interest Rates & Financing:
The rate environment is expected to ease further, offering relief to borrowers. With inflation hovering near 2% and economic growth slowing, the Bank of Canada is widely expected to cut rates again—potentially to 2.25% by summer (RBC Economics)[25]. A weak jobs report in April further supports this view[26]. As mortgage rates dip into the low 3% range, monthly housing costs may become the most affordable since 2020, potentially reactivating buyer interest by late 2025.
Economic & Employment Risks:
However, the broader economy remains fragile. Ongoing U.S.–Canada trade tensions pose a major risk. Negotiations between Prime Minister Carney and President Trump are underway, but prolonged tariffs could disrupt manufacturing and agriculture, trigger layoffs, and erode consumer confidence. With 38% of Canadians now concerned about job security (BMO survey)[27], a recession could significantly dampen housing demand through year-end.
Immigration & Demographics:
Recent federal policies are set to slow population growth. Permanent resident targets were reduced to 395,000 for 2025 (down from 465,000 in 2024)28, and temporary resident caps are being phased in[29]. These shifts may soften rental demand in cities like Toronto and Halifax, particularly for condos and student housing. While the full impact will unfold gradually, the near-term trajectory for housing demand is lower than earlier projections, suggesting moderate price trends and fewer bidding wars.
Policy & Affordability Initiatives:
The federal government is prioritizing supply-side solutions. Carney’s $25 billion “Build Canada Homes” initiative aims to scale modular housing and factory-built homes, with rollout expected in late 2025. Additional incentives for first-time buyers—such as tax credits or down payment support—may arrive in the fall fiscal update. Meanwhile, Ontario and B.C. are advancing provincial reforms to fast-track approvals and increase housing stock. All these efforts are geared toward improving supply and affordability, which over time will further moderate price growth. The days of 10% annual price gains likely won’t return soon, given this policy shift.
The Real Estate Institute of Canada (REIC) equips its members to navigate market complexities, ensuring they stay ahead of evolving market trends. As we look at 2025, with its mix of rate cuts, policy changes, and shifting demand dynamics, REIC fosters collaboration between stakeholders to tackle challenges like affordability, supply constraints, and immigration policy shifts. By championing ethical practices, innovative solutions, and professional education, REIC empowers members to thrive in an uncertain and transformative market landscape.
[1] https://www.crea.ca/cafe/canadian-homes-sales-drop-as-crea-downgrades-2025-forecast/
[2] stats.crea.ca
[3] stats.crea.castats.crea.ca
[4] stats.crea.ca
[5] bnnbloomberg.ca
[6] gvrealtors.ca
[7] nesto.ca
[8] creb.com
[9] blog.royallepage.ca
[10] canadianmortgagetrends.com
[11] Statistics Canada
[12] reuters.com
[13] stats.crea.ca
[14] crea.ca
[15] crea.ca
[16] cmhc-schl.gc.ca
[17] assets.cmhc-schl.gc.ca
[18] canadianmortgagetrends.ca
[19] blog.royallepage.ca
[20] mpamag.com
[21] mpamag.com
[22] investmentexecutive.com
[23] economics.td.com
[24] crea.ca
[25] rbcis.com
[26] statcan.ca
[27] https://finance.yahoo.com/news/bmo-survey-rising-recession-concerns-100000850.html
[28] monitor.icef.com
[29] canadianmortgagetrands.com
[2] stats.crea.ca
[3] stats.crea.castats.crea.ca
[4] stats.crea.ca
[5] bnnbloomberg.ca
[6] gvrealtors.ca
[7] nesto.ca
[8] creb.com
[9] blog.royallepage.ca
[10] canadianmortgagetrends.com
[11] Statistics Canada
[12] reuters.com
[13] stats.crea.ca
[14] crea.ca
[15] crea.ca
[16] cmhc-schl.gc.ca
[17] assets.cmhc-schl.gc.ca
[18] canadianmortgagetrends.ca
[19] blog.royallepage.ca
[20] mpamag.com
[21] mpamag.com
[22] investmentexecutive.com
[23] economics.td.com
[24] crea.ca
[25] rbcis.com
[26] statcan.ca
[27] https://finance.yahoo.com/news/bmo-survey-rising-recession-concerns-100000850.html
[28] monitor.icef.com
[29] canadianmortgagetrands.com
Allwyn Dsouza is REIC’s Senior Analyst, Market Research and Insights. He can be reached at [email protected]. Media enquiries can be directed to [email protected]